Indicator Divergence
When price makes a new high or low that a momentum indicator doesn't confirm, commonly read as a sign of weakening underlying momentum.
Indicator divergence occurs when price makes a new high or low, but a momentum indicator (such as RSI or MACD) fails to make a corresponding new high or low alongside it — commonly interpreted as a sign the move's underlying momentum is weakening, even while price itself continues.
"Regular" divergence (price makes a new extreme the indicator doesn't confirm) is commonly discussed as a potential reversal warning; "hidden" divergence (the indicator makes a new extreme price doesn't confirm) is commonly discussed as a potential trend-continuation signal instead — the two are read in opposite ways. See Kaavon's dedicated Understanding Indicator Divergence article for the full distinction.
Examples
- Price making a new high while RSI makes a lower high is a classic example of regular bearish divergence, commonly watched as a reversal warning.
- Regular divergence and hidden divergence are read in opposite ways, despite both involving a mismatch between price and an indicator's extremes.